Reward Redemption Research Articles

Credit card reward donation with scarcity messages

PurposeThe purpose of this paper is to investigate the effect of reward redemption programs on donation amount, donation percentage and donation intention in the context of a bank credit card.Design/methodology/approachA 2 × 2 × 3 experiment is implemented with 1,070 consumers accessing a national US-based sample with a small compensation. The authors use general linear model to test the proposed hypotheses.FindingsThe findings show the main effects of reward types, limited-time message and value of reward redemptions on the percentage of donations and overall donation intention to charity. The type of reward (cash/points) is found to interact with the limited-time message and with the value of reward redemptions.Originality/valueNo prior studies have addressed the relationship between credit card redemption rewards and scarcity messages in the donation context. The study contributes to the understanding of the effectiveness of credit card redemption rewards with scarcity message in improving a consumer’s donation intention.

Digitalization of Loyalty: Impacts of Mobile Technology on Reward Redemption and Engagement Level

ABSTRACT Although digitalization is a prevalent strategy in reward programs, a minimal amount is known regarding the relationship between reward app usage and reward redemption behaviors. The enhanced availability and accessibility of information via mobile app can alter customers’ reward-redemption patterns and engagement level, highlighting the need for firms to adjust their reward-based service strategies. Using unique datasets that reflect individual consumers’ transactional and reward redemption behaviors, we conducted a series of analyses to capture the dynamics in the latent engagement state transitions of customers according to the type of reward program used. Results show that although reward app usage, on average, induces a more active engagement state, it polarizes the volatility of engagement state transitions. Furthermore, we find that greater volatility of engagement state transitions is significantly associated with a higher likelihood of churn. Finally, a follow-up survey and panel vector autoregression analyses are conducted to uncover the mechanisms that underlie the relationship. The results provide insights into how retailers can strategically design their reward programs in the emerging mobile-based omnichannel environment.

Healthy foods, healthy sales? Cross-category spillover effects of a reward program promoting sales of fruit and vegetables

Introduction & BackgroundGlobally, consumption of Fruit and Vegetables (F&V) remains below nutritional guidelines. Marketing healthy products can be complex for retailers, and a key challenge is the design of strategies that benefit retailers, e.g., through improved loyalty, and deliver progress on societal goals.
 Objectives & ApproachThis study evaluates a point-plus-cash frequency reward program where participants received points by purchasing selected F&V, redeemable against a reward (plush toys in the shape of F&V). We estimate the impact of the program using a difference-in-difference-in-difference model, which compares expenditures in several categories before, during, and after the promotional period, across two different years, and separately for consumers who redeemed a reward and those who did not. Identification includes weighting for the propensity scores, and using an instrumental variable approach.
 Relevance to Digital FootprintsThe data refers to grocery expenditure in five categories in the focal retailer for over 268,000 consumers, over 27 weeks for 2 years, as recorded through their loyalty card.
 ResultsThe reward program significantly increased expenditures in F&V in the focal retailer during the promotional period. However, results differed depending on reward redemption. For reward-redeemers, the program increased expenditures in F&V as well as in other food categories, an effect that persisted – at a declining rate – after the program stopped. The program had a short-lived effect on non-rewards redeemers, who only increased F&V expenditures during the promotional period.
 Conclusions & ImplicationsResults indicate that a loyalty program promoting sales of F&V can create win-win benefits to both society and the retailer: it increases expenditures on healthy foods (F&V), while improving overall loyalty (i.e., expenditures) to the retailer.

On-demand ride-sourcing markets with cryptocurrency-based fare-reward scheme

Cryptocurrency-based fare-reward scheme has been emerging from on-demand ride-sourcing platforms. The reward scheme provides each passenger with some units of cryptocurrency as rewards for use of ride service. The passengers can redeem the rewards for various redemption options. The redemption options offer the passengers economic benefits to offset a portion of costs of using ride services. In this way, the economic benefits serve as incentives for the passengers to repeatedly use ride services, which leads to increase in passenger demand for the platforms. From a passenger perspective, the reward scheme has a distinctive feature in that economic benefits can fluctuate according to changes in price of cryptocurrency in the future. Therefore, the passengers perceive the benefits differently based on their own risk preference and expectation of future price changes. It creates a challenge for the platforms because the optimal decisions for ride services vary by the value that the passengers place for their cryptocurrency rewards. To tackle this challenge, this paper analyzes the impacts of the reward scheme on on-demand ride-sourcing markets. The analysis is done with a mathematical model where a ride-sourcing platform makes decisions for trip fare, vehicle fleet size and cryptocurrency reward size. The reward decision is available under the assumption that the platform secures as many units of cryptocurrency as it rewards to passengers at their equilibrium price level. The model defines passengers’ perceived value of cryptocurrency rewards in terms of risk aversion level and expectation of future price growth of cryptocurrency. Afterwards, we investigate equilibrium and optimal properties of monopoly, social-optimum and second-best optimum ride-sourcing markets. Our analysis gives several key insights on the markets. First, the markets always locate at normal regime where interactions between passenger demand and vehicle supply for ride services converges to a stable equilibrium state. Second, this study shows that a ride-sourcing platform would make a decision to reward if passengers expect larger economic benefits from future redemption of cryptocurrency rewards than their current value. Third, it is shown that the quality of ride services would get worse because average pick-up time for passengers and drivers gets longer with more passenger retention. Fourth, this paper finds that the markets have more room to improve profit or social welfare as passengers expect larger speculative gains from reward redemption.

How push messaging impacts consumer spending and reward redemption in store-loyalty programs

Retailer loyalty programs (LPs) are pervasive in grocery retailing. However, participant spending and redemption typically wear off over time and traditional communication has not revealed very effective at maintaining program engagement. We study the impact of in-app mobile push notifications on consumer participation and reward collection in store-loyalty programs. Using a unique data set covering consumer spending before and during such a program, we estimate the effect of push messaging on expenditure and reward redemption during the program. We report positive effects of push messages on spending, and even stronger effects on redemption, relative to a control group not receiving such messages. Due to the savings dynamics, the total spending impact is larger for messages sent early on rather than late in the program, while the opposite holds for the total number of stamps redeemed. Conditioning on observable consumer characteristics, we allow for heterogeneous treatment effects and find that the spending and redemption effects of push messaging increase with high levels of pre-program spending. Our findings reveal which loyalty-program stakeholders benefit the most from mobile marketing campaigns, and help to formulate rules for campaign scheduling and targeting.

Can restrictions on redemption timing boost profitability of loyalty programs in competitive environments?

This research investigates whether it is beneficial for competing firms offering loyalty programs (LPs) to restrict the reward redemption time. We develop a game-theoretic model where competing firms decide an LP’s redemption policy and pricing and identify firms’ restriction levels. The results show that, at equilibrium, firms implement a restrictive policy when customers value rewards more than time, while an unrestricted policy is implemented when customers value time. Each firm should increase prices in response to its competitor’s restrictive policy.

When Loyalty Goes Mobile: Effects of Mobile Loyalty Apps on Purchase, Redemption, and Competition

This research investigates how a shift from traditional loyalty cards to mobile-driven loyalty apps affects consumers’ reward redemption patterns, purchase behaviors, and store-level competition. The findings indicate that loyalty app adoption is associated with increased expenditure and purchase frequency as well as more active point redemption. In a multivendor loyalty program (MVLP) context, the use of loyalty apps is associated with spillover effects in which case customers visit more stores that they had not previously considered and exhibit diminished allegiance to their focal shop after they adopt a loyalty app. Finally, the adoption of loyalty apps is related to deal-prone behaviors because informed consumers tend to selectively purchase highly discounted products. Our findings provide several valuable implications for managers and platform owners who are considering launching mobile loyalty programs (LPs) and participating in an MVLP market. Although the merits of loyalty app adoption are apparent, we caution against potential downsides at individual store levels. Many customers are likely to succumb to deals, selectively purchasing highly discounted products with low margins through loyalty apps. The thrust of LPs should be directed toward fostering a strong connection with a brand, going beyond the promise of deals and promotions.

Tactical use of rewards to enhance loyalty program effectiveness

A key member benefit for participating in a loyalty program (LP) is the rewards earned for points accrued. One popular reward structure is a catalog of many diverse items. The rewards among this broad selection are likely to differ in their appeal due to their intrinsic differences and customer heterogeneity. Prior research has shown that after redeeming a reward, LP members are more motivated to increase their purchase volume/frequency and share-of-wallet within the program, thereby becoming more active. In this study, we fit a hidden Markov model to a 4½ year longitudinal data set of points accrual and reward redemption activity for about 4500 members of a large coalition LP. Our analysis reveals three latent states — active, hyperactive and inactive. We then investigate the likelihood of LP members transitioning between these states across successive time periods, and examine the reward categories and marketing effort associated with these transitions. Subsequently, we use our model to optimally promote particular reward categories to encourage LP member migration to managerially desirable states or prevent them sliding into a less desirable state. Our proposed optimal reward strategy potentially increases the estimated proportion of LP members in the hyperactive latent state from 35.7% to 40.1%, with a resultant increase in sales revenue for retailers and service providers in the LP of 7.7%. We find that rewards which are more fungible have the strongest influence on increasing points accrual activity.

사회적 지지가 목표달성 의도에 미치는 영향: 판촉 보상물 획득 과정을 중심으로

사회적 지지가 목표달성 의도에 미치는 영향: 판촉 보상물 획득 과정을 중심으로

Predicting Outcomes from Engagement With Specific Components of an Internet-Based Physical Activity Intervention With Financial Incentives: Process Analysis of a Cluster Randomized Controlled Trial.

BackgroundInvestigating participant engagement and nonusage attrition can help identify the likely active ingredients of electronic health interventions. Research on engagement can identify which intervention components predict health outcomes. Research on nonusage attrition is important to make recommendations for retaining participants in future studies.ObjectiveThis study aimed to investigate engagement and nonusage attrition in the Physical Activity Loyalty (PAL) scheme, a 6-month complex physical activity intervention in workplaces in Northern Ireland. The intervention included financial incentives with reward redemption and self-regulation techniques. Specific objectives were (1) to determine whether engagement in specific intervention components predicted physical activity at 6 months, (2) to determine whether engagement in specific intervention components predicted targeted mediators at 6 months, and (3) to investigate predictors of nonusage attrition for participants recording daily activity via the PAL scheme physical activity monitoring system and logging onto the website.MethodsPhysical activity was assessed at baseline and 6 months using pedometers (Yamax Digiwalker CW-701, Japan). Markers of engagement and website use, monitoring system use, and reward redemption were collected throughout the scheme. Random-effects generalized least-squares regressions determined whether engagement with specific intervention components predicted 6-month physical activity and mediators. Cox proportional hazards regressions were used to investigate predictors of nonusage attrition (days until first 2-week lapse).ResultsA multivariable generalized least-squares regression model (n=230) showed that the frequency of hits on the website’s monitoring and feedback component (regression coefficient [b]=50.2; SE=24.5; P=.04) and the percentage of earned points redeemed for financial incentives (b=9.1; SE=3.3; P=.005) were positively related to 6-month pedometer steps per day. The frequency of hits on the discussion forum (b=−69.3; SE=26.6; P=.009) was negatively related to 6-month pedometer steps per day. Reward redemption was not related to levels of more internal forms of motivation. Multivariable Cox proportional hazards regression models identified several baseline predictors associated with nonusage attrition. These included identified regulation (hazard ratio [HR] 0.88, 95% CI 0.81-0.97), recovery self-efficacy (HR 0.88, 95% CI 0.80-0.98), and perceived workplace environment safety (HR 1.07, 95% CI 1.02-1.11) for using the physical activity monitoring system. The EuroQoL health index (HR 0.33, 95% CI 0.12-0.91), financial motivation (HR 0.93, 95% CI 0.87-0.99), and perceived availability of physical activity opportunities in the workplace environment (HR 0.96, 95% CI 0.93-0.99) were associated with website nonusage attrition.ConclusionsOur results provide evidence opposing one of the main hypotheses of self-determination theory by showing that financial rewards are not necessarily associated with decreases in more internal forms of motivation when offered as part of a complex multicomponent intervention. Identifying baseline predictors of nonusage attrition can help researchers to develop strategies to ensure maximum intervention adherence.Trial RegistrationISRCTN Registry ISRCTN17975376; http://www.isrctn.com/ISRCTN17975376 (Archived by WebCite at http://www.webcitation.org/76VGZsZug)

Buying free rewards: the impact of a points-plus-cash promotion on purchase and reward redemption

While many studies have investigated consumer purchase behavior in reward programs, a better understanding of customer redemption behavior is lacking, particularly when promotions affect a core aspect of reward programs—free rewards. In this paper, we examine the impact of a promotion on purchase and reward redemption in a reward program in which consumers can partially cover the cost of a free reward with their money. The literature on reward programs suggests a positive reinforcement caused by reward redemption, whereas the literature on promotion provides different views regarding the existence of a postpromotion dip. Using data from a major retailer’s reward program, we verify that such a promotion attracted customers with less transaction activity and shorter tenure. Interestingly, consumers using the promotion increased their preference for hedonic rewards compared to their previously observed behavior. This change in preference persisted after the promotion ended. Overall, the promotion significantly increased the number of redemptions but generated a negative impact on subsequent consumer behavior by decreasing purchase incidence and quantity. Our findings point to a need to understand the trade-off between spending money on buying an otherwise free reward and future regular purchases.

Buying Free Rewards: The Impact of a Points-Plus-Cash Promotion on Purchase and Reward Redemption

While many studies have investigated consumer purchase behavior in reward programs, a better understanding of customer redemption behavior is lacking, particularly when promotions affect a core aspect of reward programs—free rewards. In this paper, we examine the impact of a promotion on purchase and reward redemption in a reward program in which consumers can partially cover the cost of a free reward with their money. The literature on reward programs suggests a positive reinforcement caused by reward redemption, whereas the literature on promotion provides different views regarding the existence of a postpromotion dip. Using data from a major retailer’s reward program, we verify that such a promotion attracted customers with less transaction activity and shorter tenure. Interestingly, consumers using the promotion increased their preference for hedonic rewards compared to their previously observed behavior. This change in preference persisted after the promotion ended. Overall, the promotion significantly increased the number of redemptions but generated a negative impact on subsequent consumer behavior by decreasing purchase incidence and quantity. Our findings point to a need to understand the trade-off between spending money on buying an otherwise free reward and future regular purchases.

Market Positioning Using Cross-Reward Effects in a Coalition Loyalty Program

While single-brand reward programs encourage customers to remain loyal to that one brand, coalition programs encourage customers to be “promiscuous” by offering points redeemable across partner stores. Despite the benefits of this “open relationship” with customers, store managers face uncertainty as to how rewards offered by partners influence transactions at their own stores. We use a model of multi-store purchase incidence to show how the value of points shared among partner stores can explain patterns in customer-level purchases across them. The model is used to empirically test hypotheses on how reward spillovers among partners are driven by: (1) differences in policies on reward redemption, (2) the overlap in product categories between stores, and (3) geographic distance between stores within a city. In addition, we leverage variation generated by a natural experiment, i.e., a devaluation of the program's points, to demonstrate how the value of points influences the positioning of partner stores within the coalition and the purchasing patterns across them. We conclude by delineating some managerial implications for the design of a coalition's reward policies, including a simulation showing that customer-centric targeted rewards can be an effective strategy to compensate for the devaluation.

‘Buy n times, get one free’ loyalty cards: Are they profitable for competing firms? A game theoretic analysis

This paper evaluates whether firms offering loyalty programs (LPs) should choose a restricted redemption policy by imposing a specific number of purchases before customers can redeem their points. Such restriction is commonly offered in form of ‘buy n times, get one free’ loyalty cards. We develop a multinomial logit model where consumer's utility depends on the value of the product and of the rewards. Using an iterative algorithm, we numerically solve a Nash game for two firms offering loyalty programs. Optimal strategies and profits are obtained for three different scenarios (games): (1) both firms do not restrict redemption; (2) both firms restrict redemption; and (3) only one firm restricts redemption while the other firm does not. Our main findings indicate that each firm's optimal strategies are significantly affected by whether the competitor decides to restrict or not to restrict redemption. In particular, a firm that restricts reward redemption should offer a higher price if its competitor also restricts redemption. Further, the dominant strategy of the game depends on customers’ valuations of time and rewards. For example, when customers highly value time but do not highly value rewards, the dominant strategy for both firms is not to restrict redemption. Alternatively, firms can face a Prisoner dilemma situation leading to unrestricted redemption policy for intermediate levels of customer valuation of both time and rewards.

Impacts of Reward Accrual Effort on Redemption Behavior in a Multi-Vendor Loyalty Program

This research explores two key facets of behavior (reward point accrual and redemption) that consist of a loyalty program. It focuses on assessing the impact of accrual effort level on three types of redemption behavior: speed, unit size, and hedonic preference at the individual level by using large scale transaction data from a multi-vendor loyalty program providing flexible environment for point accrual and redemption. Findings from this research demonstrate that customers tend 1) to speed up point redemption, 2) to enlarge the size of redeemed points, and 3) to prefer utilitarian rewards as the level of effort at the accrual stage of reward point increases.

Impacts of Reward Accrual Effort on Redemption Speed, Unit Size and Hedonic Preference in a Multi-Vendor Loyalty Program

This research explores two key behaviors (reward point accrual and redemption) that consist of a loyalty program. The authors focus on assessing the impact of accrual effort level on three types of redemption behavior: speed, unit size, and hedonic preference at the individual level by using large scale transaction data from a multi-vendor loyalty program providing flexible point accrual and redemption opportunities. Our findings show that customers tend 1) to speed up point redemption, 2) to enlarge the size of redeemed points, and 3) to prefer utilitarian rewards as the level of effort during the accrual stage of reward point increases.

Reward redemption effects in a loyalty program when customers choose how much and when to redeem

The redemption of loyalty program (LP) rewards has an important impact on LP members' behavior, particularly on purchase behavior before and after redeeming a reward. However, little is known about the interplay between members' purchase and redemption behavior when members are not pressured with point expiration and they choose for themselves when and how much to redeem. In this context, the effects of redemption are not straightforward, as little additional effort is required from an LP member to obtain the reward. Analyzing the behavior of 3094 members in such an LP, we find that the mere decision to redeem a reward significantly enhances purchase behavior before and after the redemption event, even when members redeem just a fraction of their accumulated points. Conceptually, we refer to this enhancement as the redemption momentum, which is an alternative and novel explanation of the existence of pre-reward effects that do not depend on points-pressure. In addition to the overall impact of redemption on purchases, prior purchase behavior also enhances redemption decisions. Finally, we find a number of moderating effects on purchase and redemption behavior that derive from the length of LP membership, age, income and direct mailings. Our study's most important managerial implication is that firms should avoid imposing point expiry and/or binding thresholds in order to enhance members' purchase behavior.

Take it or leave it: Using regulatory fit theory to understand reward redemption in channel reward programs

Channel Reward Programs (CRPs) facilitate relationship management within reseller networks in distribution channels, yet a persistent problem is that rewards are not seen as valuable, which can reduce program investment. By applying Regulatory Fit theory, to understand how to sustain goal orientation (promotion or prevention) and stimulate task engagement through a match with the manner of goal pursuit, this study demonstrates that the presentation style suppliers adopt influences resellers' perceptions of reward value and their rate of point redemption with respect to CRPs. Two field studies demonstrate the mechanisms driving this effect. First, fit effects result from the interaction between reward type and presentation format (i.e., verbal vs. numerical) and affect perceived reward values and investment decisions. Second, cognitive engagement and “feeling right” about reward redemption mediate the effects of fit on investment opportunity evaluations. In turn, the findings demonstrate that CRP efficacy can be enhanced by stimulating regulatory orientations that match the presentation formats of the reward and that the dual affective–cognitive processes affect probabilistic judgments of rewards. This additional mechanism can further stimulate resellers' engagement with and investment in CRPs within complex decision-making contexts.

Effects of a reward program on inducing desirable customer behaviors: The role of purchase purpose, reward type and reward redemption timing

For capacity-constrained service firms, efforts to balance supply and demand have been centered on the management of demand, service processes and service employees. Despite the significant role customers play in the service process, few attempts have been made to manage customer roles toward that end. Meanwhile, concerns have been expressed about the potential negative impact on customer satisfaction by the firm's effort to steer customer behaviors for the firm's benefit. Thus, it is crucial to minimize these undesirable customer effects in such an attempt. In this study, we propose a customer reward program as a possible customer approach and empirically test its effectiveness.Further, we test the impact of customer understanding of the firm's entitlement to profit upon the degree of the customer's voluntary behavior for the firm's benefit. The effect of justice evaluations of the reward program on customer adoption of the program is also examined. Finally, effects of customer characteristic (purchase purpose) and reward attributes (type and redemption timing) on the reward program's effectiveness are evaluated. Findings of this study contribute to the extension of the service capacity management literature, and offer service managers valuable insights about using a customer program as a means to better match supply and demand.

Managing rewards to enhance relational worth

In this study, cognitive evaluation theory illustrates how the controlling aspects of reward redemption policy (stringent versus flexible) interact with the type of offered reward (social versus economic) to influence relational program effectiveness. We look at effectiveness by defining and measuring relational worth, the non-financial value of consumers to organizations. The hypotheses are empirically tested with a sample of season ticket holders of a professional sports team (n = 373) and then replicated in a second study with experimental data using scenarios in a hotel reward program context. Results indicate that perceived social rewards lead to affective commitment, while perceived economic rewards lead to continuance commitment. Involvement is a significant determinant in how reward type and policy influence commitment types; specifically, low-involvement consumers are more influenced by reward program signals than high-involvement consumers. Affective commitment produces the most relationally valuable consumer to an organization in terms of relational worth. Controlling policies have an undermining effect on all commitment types, regardless of reward type.